First Time Buyers: House or Duplex


Our First Home

I plan to buy a house in the next year or so in the new york city area. i am debating on whether to buy a 2 family home so that the income could help pay for the mortgage. But then the problems of renting makes me what to buy a one family. anyway I was wondering if anyone had any tips on what i should look for, avoid and any other such info. I hestitate to go to a realtor just yet as i'm not sure of what I want, what area etc. I also wanted to know what kind of down payments would be best. a lump sum to reduce my monthly mortgage payment or 5% of the purchase price and keep the rest on reserve for expenses, repairs etc. I also wanted to know what the protocol was for purchasing a house. if I see a house I like do I make a bid or go with the asking price? should I have it inspected before I make an offer. what are things that I should look for when inspecting a home. this will be my first house.
-- Angela N.

We Bought a Duplex

We live in the New York City area and bought a two family two years ago. At the time it was a good deal and we were having a hard time finding a one family for the same price. Anyway, we don't plan on staying here so we are saving the rent from the apartment for a down payment on our next house. We were very picky about our tenants and they are wonderful (although I have heard some horror stories). As far as down payment I would go with 20% if possible so you can avoid paying PMI (an insurance mandatory for those who put down less than 20%). As far as what you offer, I would never offer the asking price unless it was the absolute house of your dreams and you knew there were others interested. I know it's a risk but when houses are listed owners usually expect to get less than what they are asking. Also, if the owners will only except asking price they will counter your bid.
-- Jackie

Inspections Can Help Save

I come from Australia, so I won't answer your questions about house/duplex or size of deposit, as the situation here is most likely quite different. On the subject of inspection, however, I have some recent experience. My fiancee and I were looking to buy a 3 bedroom brick house. We paid $250 for a professional valuation, and another $195 for a full building and pest inspection. The valuation gave us solid evidence to get a deal lower than the asking price (saving us nearly $5,000) and the building inspection showed a few things that needed attention and got us another $3,000 off the price. But I think the biggest benefit of the two inspections is the peace of mind they bring, knowing we have not been ripped off and do not have major repairs to do in the near future.
-- Darren C.

Knowledge Is Power

The better you know yourself and your family, the easier it will be to make the single family vs. two-family decision. Financially, it is wonderful to have help with your mortgage and have additional tax deductions as well. A double is a good first home because you can eventually save enough to buy a single and keep the double for income. But, you have to learn landlord/tenant laws, screening processes and be willing to be bothered when you are busy. Also, you should not set yourself up to have to rely on the rent to make your payment, because in the event of default of the tenant, you do not want to be affected.

You need to understand your market to know what to pay. A trip to your library should reveal what sold for how much in the recent past, including size etc. Start driving around and check out the comps. A realtor can print out a price comp for you as well. In many places, in order to work with a realtor you have to sign agreements, but they are not binding if you decide you would rather work with someone else. Besides checking out the library, you need to start attending some open houses to get an idea of what is out there.

Most importantly, you need to start with at least two lenders to see what they will allow you to purchase and the best thing you can do is get yourself pre- approved. It is not usually necessary to pay any fees at all for this service...always remember the lenders make money from are the customer. Once you see the financial options you can use simple financial programs to determine the best amount of downpayment etc. in your individual situation.
Judy C
real estate broker, Certified Property Manager

Remembers, Rental Income Isn't Guaranteed

I am in the middle of purchasing my first home. Over the past few weeks I have spoken with many experts and read many books on the subject. Your fist questions was whether to get a single family house or duplex. While it would be nice to have the rental income to help pay the mortgage, this should not play a part in deciding what you can or cannot afford as you cannot be sure the other apartment will always be providing rental checks. Also, especially with this being your first house, you need to keep in mind that you will effectively be living in an apartment still, even though you own it.

When you are ready to buy you will be putting in an offer below what the asking price is. The seller will either accept your offer or make a counter-offer. If you have been prequalified for a loan (or better yet - pre-approved) you will be in a better bargaining position.
-- Jason S

Questions to Ask

My husband and I bought our first house 2 years ago and asked ourselves many of the questions you have asked. Note: my advice is strickly personal opinion.

How much time will you have to devote to your home?

If you buy a duplex you will have to deal with repairs, cleaning when renters move out and possibly sharing a wall with loud neighbors.

If you buy a new house (what we did), how much time and money will you have to personalize it? There are a lot of things a brand new home does not come with (ie. landscaping, shed, garage stuff (shelving, attic ladder, wash tub)). My point is, it all adds up, both time (we did most of it ourselves) and money. We both have an hour commute and work 9-10 hours a day. Time is a big issue for us right now. I have to admit, there are times I wish we bought a condo closer to the city we work in.
-- DeeDee

A Duplex Was Great for Us

Duplexes, in-law units, etc. are a great way to go! Although property management is not for everyone my husband and I found a house 18 years ago with the potential for having an upstairs "studio" apartment with a separate entrance (this was when mortgage interest rates were 14%!). We did the conversion and the income that unit brought in for 11 years allowed me to stay home with our kids. Then when finances improved and we needed the space it was nice to regain the upstairs for ourselves as our "master bedroom suite".

Our experiences with that studio rental led us to eventually investing in real estate and purchasing 5 other duplexes toward our retirement plans. Although we could tell horror stories about some of our property management experiences I have to say that over 16 years and currently 15 rental units we have never had to evict anyone.

Briefly here are some important things for Angela or anyone to consider:

* LOCATION is everything. Buy in a good area and think about schools even if you don't have kids (your tenants might).
* Look for houses with the right things wrong with them--cosmetic fix-ups not major foundation or roof work unless you're a contractor or the price is low enough to do this work.
* Check zoning laws for multiple families
* If you're looking at real estate as an investment put as little a down payment as you can (and buy another property!).
* Building inspections are worth every penny.
* Read Leigh Robinson's "Landlording" book for property management and Wm. Nickerson, Albert Lowry, Robert Bruss, or Robert Allen for real estate investment ideas.
* Create or use a good application form and check those references (current & previous landlords, current & previous employment for stability, etc.)
* The most important thing is if you don't treat this like a business it can be very easy to be a soft touch and find yourself dipping into YOUR savings to make the monthly mortgage payments.

My husband and I found we make a good team--there are things he likes to do that I don't and vice versa, it's not easy but there are some great benefits.
-- Karen C.

I Hate Duplexes

I grew up in a duplex, and refuse to buy one. You see if you own a duplex, you have no control over who lives in the other side. We had a person who kept thier piano against the wall( joining the two places), we would wake up at all times of the night to thier music. We had another neibour that had a pet mouse, who got into our half of the duplex. Some of the duplexes have an open ceiling across the top, easy access to your neibours half.

There is also the painting problem. Too unmatching sides can drop your value. This also applies to window replacing. I would not look at anything duplex!
-- Glenda H.

Finding a Bargain

When you find a house you like you will be asked to make an offer. I have never seen a home sell at it's asking price so this is a must. If you are unsure what to offer, ask your Realtor for a list of recently sold homes that are similar to the one you want. This should give you a good idea of the fair market value of that home. Then remember to go lower so that the price you want to get is about halfway between your bid and the asking price. This will leave you plenty of room for negotiating. Also, you can use appliances and other features to negotiate with by removing them or adding them during the bidding process.

Once you have agreed on a price you will want to include that this contract is pending a home inspection. Then hire a qualified home inspector (get referrals from friends or your Realtor) to conduct the inspection. This will usually cost a few hundred dollars, but is well worth the money! The home inspector should inspect everything from the basement to the roof, including things like electrical outlets. This will give you a good idea of what repairs you will have to make. If there is a major problem you will be able to get out of the contract without losing any of your money. Once you've found out what repairs will need to be made get estimates and add 40% to this figure. This is the amount of savings you should probably keep out of the downpayment to make all repairs.
-- Becky

Copyright 1996 - 2004 "The Dollar Stretcher, Inc." Used by permission. All rights reserved.